Fort Smith business license revenue less than expected

Business licenses fees brought the City of Fort Smith about $360,000 in revenue in 2023, somewhat less than anticipated when the fees were reinstated in 2018, but up more than 3% compared to 2022 revenue.

Reinstating business licenses in Fort Smith was proposed in 2015 as an option to cover a shortfall in the city’s pension contributions for police and fire employees. The fee was dropped more than 30 years before in exchange for business support of a sales tax increase.

The Fort Smith Board of Directors passed an ordinance in December 2017 to reinstate the fees. In 2017, the city estimated the business license fee would raise $471,000 annually, according to information published when the ordinance was brought before the board in 2017. At a board study session Jan. 23, Director Neal Martin said he thought when the business licenses were reinstated, the city anticipated about $750,000 in revenue.

In 2023, the city issued 3,554 business licenses. Total revenue from the fees, including late fees, was $359,520, up 3.14% compared with 2022 revenue. There was $78,700 paid in late fees and $53,480 paid in alcohol fees, a report from the city said. Revenue from the fees totaled $348,618 in 2022 and $249,945 in 2021. Fees were waived in 2020 during the COVID-19 pandemic. Revenue from the business licenses fees help fund the Fort Smith Police Department.

“Since the implementation of the $100 licensing fee, the police department has been allocated most or all of the money collected by this fee for the use in public safety,” Police Chief Danny Baker said in a memo to the board.

He also said the funds had been used by the department to purchase and upfit a new incident response vehicle and new primary police vehicles, to purchase animal control vehicles and equipment and unmarked detective vehicles, and to help fund the implementation of a 24% pay raise in the second half of 2023.

All businesses within the incorporated city limits of Fort Smith must obtain a business license unless the business qualifies for an exemption, according to city code. Generally the annual business license fee is $100, though the fee for food trucks is $150 and liquor license fees also are charged. The ordinance requires businesses operating temporarily in Fort Smith (for example construction companies) to also apply for and receive a temporary license.

“My concern is businesses in the city who operate but don’t have a license. I especially am concerned with those not based in Fort Smith doing construction here,” Director Lavon Morton said during the Jan. 23 study session.

He said he has called the city on more than one occasion to double check whether a company he sees doing business has a license in an attempt to “level the playing field” for Fort Smith-based business. He said only about 50% of the time do those businesses have a Fort Smith license.

“The original estimate was far more than what actually comes in. We collect far less,” Morton said. “I would like to see the city check those utility accounts that are commercial accounts with business licenses and make sure we are billing all (city businesses).”